Understanding GST Threshold Limits and Exemptions: Essential Guide

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Published Date:  19-12-2023   Author:   samradni-p
captainbiz understanding gst threshold limits and exemptions essential guide

Goods and Services Tax is one of the excellent tax provisions in the Indian taxation system. As per this mechanism, if a business’s annual sales exceed the specified exemption limit, it must register for GST.

Every business in India must get GST registration. It will be considered offensive if a business conducts operations without registering for GST. And the individual is charged with penalties. However, businesses must know the threshold limits and exemptions before registering for GST.

Let’s dig deeper into GST registration limits.

GST threshold limits for regular taxpayer registration

Businesses whose annual turnover is more than ₹20 lakhs (for services supply) and ₹40 lakhs (for goods supply) must get GST registration. They are liable for paying taxes for the taxable services and goods. Business entities with an annual turnover of ₹40 lakhs or less are not required to register for GST. However, they can opt for GST registration voluntarily. It is advantageous for the business entities as they can reap the input tax credit benefits.

Note – Special category states have different minimum annual turnover amounts for GST. The minimum threshold limit for them is ₹10 lakhs (for services supply) and ₹20 lakhs (for goods supply). The special category states are – Manipur, Arunachal Pradesh, Mizoram, Meghalaya, Tripura, Nagaland, and Sikkim.

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Disclaimer – The above mentioned figures for GST threshold limits are standardised and updated as of 2023.

Exemptions and concessions for regular taxpayer registration

Services, goods, supplies, and businesses must ensure GST registration. Even individuals can also register for it. Given they meet all the specified conditions. But there are a few exceptions. Taxpayers and businesses can avail full GST tax exemption for the following categories –

  • Taxpayers who belong to the limit specified for exemption
  • Individuals engaged in other activities besides goods or services supply.
  • Suppliers dealing with exempted goods and services
  • Agriculturists
  • Individuals supplying goods or services that belong to the non-GST category

GST exemption for small businesses and start-ups

Individuals looking forward to starting their business can reap many benefits from the latest GST regulations. Below are the major points you must know about GST exemption for start-ups.

  • Businesses engaged only in goods supply having turnover of ₹40 lakhs or less are exempted from GST.
  • Start-ups whose yearly aggregate turnover is lower than ₹1.5 crores can opt for a GST composition scheme. Under this scheme, the taxpayers must pay a specified rate. The rates are determined according to their annual turnover value. The rates range from 1 to 6% per annum.
  • Small businesses need not deal with e-invoicing for GST. However, e-invoicing is mandatory for businesses with an annual turnover of over ₹10 crores.
  • Businesses with an annual income of ₹5 crores or less can file tax quarterly.

Goods exempted under GST

Listed below are the goods that are exempted from GST in India –

  • Dry and fresh vegetables such as onions, potatoes, etc.
  • Parts used for hearing aid manufacturing, slates, chalks, handloom, and others
  • Leguminous vegetables
  • Non-GST items such as fresh milk, egg, fish, and others
  • Ginger, grapes, unroasted coffee beans, green tea leaves, melons, garlic, and more – non-processed items
  • Food items without branded containers, such as hulled cereal grains, rice, corn, wheat, and others
  • Unspun jute fibres, khadi fibre, raw silk, etc.
  • Components such as human blood

Note – Some non-GST goods are taxable under GST once they are processed

Services exempted under GST

There are many services which are exempted from GST, including the following –

  • Public transportation services include metro, metered cabs, auto-rickshaws, and others.
  • Agricultural services such as packaging, supply, harvesting, cultivation, warehouse, and machinery leasing are exempted from GST. 
  • Agricultural products, transportation services
  • Agricultural goods that are exported
  • Supply of labour for farmlands
  • Transportation of goods where the charges are below ₹1500.
  • Government services
  • Waxing, pre-conditioning, retail packing, and other similar services
  • Foreign diplomatic services
  • RBI, IRDAI, Central and State Governments, NPS, and more provide services.
  • Educational and healthcare services include paramedics, VET clinics, and mid-day meal catering.
  • Banking services such as Basic Saving Bank Deposit services that are operated under the Pradhan Mantri Jan-Dhan Yojana
  • Charity and ambulance services are also exempted under GST.
  • Services related to sports organisations, religious ceremonies, libraries, and tour guides are GST-exempted

Note – Rearing of horses is an exception here. They are exempted from services.

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Disclaimer – The figures and pointers mentioned above for GST exemptions are standardised and updated as of 2023.

Impact of threshold limits and exemptions on NRT registration

Threshold limit impact on NRT registration

The taxpayers dealing in the supply of goods or services must obtain GST registration in their union territory or state where the taxable supply is done. But this provision is applicable only if their aggregate turnover in that financial year is more than the specified threshold limit (₹20 lakhs / ₹40 lakhs).

Impact of exemption on NRT registration

GST registration isn’t required if the individual is dealing in goods and services under 100% exemption.

GST registration is compulsory for every individual conducting business in India. But you don’t need GST registration if your business handles any activities or deals in the supply of goods or services under exemption categories specified for regular taxpayer registration.

Threshold limit calculations and applicability for NRT regular taxpayers

The following are taken into consideration to calculate the GST Threshold Limit –

  • All taxable supplies
  • Turnover of the business across India
  • Exports
  • All exempted supplies

The following are excluded when calculating the GST Threshold Limit –

  • Service tax amount and central tax goods value
  • Tax amount of union territory or state goods and services
  • GST Compensation Cess
  • Services Tax Amount and Integrated Goods tax value
  • Taxable transactions that come under the reverse charge system

The business entities must be careful when calculating the Annual Turnover. It plays a major role in determining the threshold limit. 

Let’s say a business deals only in the supply of exempted goods or services. In such cases, the entity doesn’t need GST registration even if its turnover exceeds the threshold limit. 

GST exemption means the goods or services supplied are taxable but exempted from the GST levy. The business is responsible for providing valid proof that their goods or services come under the exempted category. It would help to be careful when determining your business’s tax liability, as it will also impact the tax rate.

Also Read: Understanding GST Threshold Limit: Calculating The Registration Requirement

Staying informed about changes in threshold limits and exemptions

Threshold limit for GST Registration

The threshold limit for registration varies from one state to another. Check the table below for details.

States

 

Nature of goods and services supply Threshold limit
      Mizoram

      Manipur

      Tripura

      Nagaland

 

Dealer of services or goods or both ₹10 lakhs
      Meghalaya

      Arunachal Pradesh

      Uttarakhand

      Telangana Sikkim

      Puducherry

 

Dealer of goods or services or both ₹20 lakhs
      Assam

      Jammu & Kashmir

      Himachal Pradesh

      All other Indian states

 

      Supply of services

      Supply of both goods and services

₹20 lakhs
      Assam

      Himachal Pradesh

      Jammu & Kashmir

      All other Indian states

Intra State goods supplier ₹40 lakhs

GST exemption from registration

  • Individuals whose annual turnover for goods supply comes under the threshold exemption limit – ₹40 lakhs for goods supply, ₹20 lakhs for services supply, ₹20 lakhs for the specified category. For special category states, the limit is ₹10 lakhs.
  • A taxpayer supplying goods like cashew nuts (not peeled or shelled), tobacco leaves, and others that come under the reverse charge category
  • An individual makes an exempt or zero-rated supply of services and goods such as fresh milk, honey, cheese, agriculture services, etc.
  • Agriculturists
  • Taxpayers involved in activities such as petroleum products, funeral services, and others that don’t come under the goods and services supply category.

Also Read: Relief for Small E-Commerce Businesses: GST Registration Exemption

Ensuring compliance with threshold limits and exemptions for NRT regular taxpayers 

Taxpayers need to be aware of the GST registration threshold limit. The information helps ensure that their business remains tax-compliant. Besides, it also fosters credibility and growth of the business in the market. Staying proactive and updated about the GST provisions will also allow you to leverage maximum benefits from the tax mechanism.

You can opt for online registration compliance for GST. It is an easy and quick process. You need to keep track of the basic factors – such as the yearly turnover of your business. If the annual turnover of your business for that fiscal year is taxable, then make sure to get GST registration.  

 However, adherence to the GST guidelines is mandatory. Taxpayers who fail to register for GST or don’t adhere to the guidelines are liable to pay heavy penalties. The CBIC (Central Board of Indirect Taxes and Customs) has given the mandate.

 If taxpayers ignore or delay the penalty, they must pay ₹100 as a fine. An additional fine of ₹200 will be levied on them in case of further delay in GST registration.

Conclusion

The exemptions and threshold limits for GST registration are core aspects of the GST mechanism. Hence, the entities that aren’t exempted or don’t come under the threshold limit must get GST registration.

Both threshold limits and exemptions are introduced to ensure a fair taxation system for all businesses. They help in balancing the tax revenue generation. They also reduce the tax burden on small businesses. The best part is that they eventually make essential services and goods affordable for the public.

So, if you run any business, keeping yourself updated with the changes in exemptions and thresholds is important. Check the regulations applicable in the area where your business activities are conducted. It will help you in making informed decisions for business growth. Understand the particulars of GST exemptions and registration for smooth business activities.

Also Read: All you need to know about the threshold limit for GST registration

Frequently Asked Questions

1.    What is meant by the threshold limit and exemption under GST?

 The threshold limit in terms of GST refers to the limit that allows the taxpayer to run a business without registering for GST. While in exemption, the taxpayer must ensure GST registration of their business, but their goods and services supplies may not come under the GST levy.

2.    What items are exempted from GST?

Essential services and goods, such as public consumption services and products, are non-taxable under GST. Also, unbranded items such as besan, atta, curd, maida, milk, unpacked grains, lassi, eggs, fresh vegetables, and others are exempted.

3.    What if the annual turnover of my business is below ₹20 lakhs?

 You are not bound for GST registration if the aggregate annual revenue of your business in the fiscal year is up to ₹20 lakhs or less.

4.    What are the GST provisions for zero-rated supplies?

 According to the CGST Act, 2017 – section 2 (47), a supply rated zero duty is exempted from GST. Or it may be exempted specifically, and the notification would be sent to the taxpayer. Such supplies are kept out of tax purview.

5.    Is GST levied on salary?

No. Salary is exempt from GST.

6.    What is the threshold limit for GST composition registration?

Taxpayers dealing in the goods and have a yearly turnover of ₹1.5 crores and ₹75 lakh – special category States in the fiscal year can register for the composition GST scheme.

The service providers must meet the threshold limit of ₹50 lakhs. However, this limit doesn’t apply to restaurant business owners.

7.    How is the threshold limit for GST calculated?

 The threshold limit is determined according to the aggregate supply turnover of a business in the fiscal year. It shall be the sum of –

  • All taxable supplies
  • Inter-state supplies value
  • All exempted supplies.
  • Turnover of all the businesses registered with the same PAN
  • Export supplies value

8.    Who can’t recover GST from the buyers?

 Composition dealers are not allowed to include GST in their bill of supply. The cost of goods and services is reduced for the end consumers. 

9.    What happens if turnover exceeds ₹20 lakhs?

 Under GST Section 2 (107), the tax will be levied on the full turnover value. However, this rule does not apply to businesses working in special states.

10. What is the threshold limit for e-invoicing?

 As of 1st August 2023, e-invoicing is mandatory for businesses with over ₹5 crore turnover.

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Samradni P

Meet Samradni Pradhan, a seasoned content writer with a passion for weaving narratives across diverse industries. Armed with a full-time MBA in Marketing, Samradni brings a wealth of experience garnered from elite advertising agencies such as Ogilvy and Mather and Lowe Lintas. With a dynamic career spanning 6 years, she has honed her craft by delving into various categories and niches, including technology, healthcare, fashion, lifestyle, and her speciality, BFSI.

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